Give me the empirical evidence

In the debate on software patents, the defenders of patents use moral and theoretical arguments, but avoid using data or facts. Different people are good at making different types of arguments. I am a believer in the division of labour. So not everyone will use empirically-rooted arguments. But it seems a bit odd to me that I cannot find anyone who writes things like:

Because Microsoft did not have a patent on the graphical user interface, it made a decision not to invest in operating systems, but because it had a patent on X it increased R&D in that area by 582%.

Instead, the supporters of software patents concentrate on theoretical arguments. As an example, take this article by a patent lawyer writing about software:

In a market where inventions cannot be protected in order to yield a return on the invested resources, very few would be prepared to make those investments available.

I like theoretical arguments, and the argument in the paragraph above is a perfectly reasonable position to have. But if patents really do have a beneficial effect in software, shouldn’t someone somewhere be able to give us some figures to back up that idea? Where is the empirical evidence?

42 comments to Give me the empirical evidence

As I see it, monopoly “protection” and “incentive” are just another sort of corporate welfare – slightly more indirect than normal, but the principle is identical.

1. The entire history of welfare and monopoly requires a strong presumption that this won’t work, and will be actively counter-productive.

2. Whether or not this form of welfare actually works, it should never be acceptable to libertarians. It does not matter if lack of monopolies reduces creativity. Liberty and property are still right, restriction and theft are still morally wrong. If neither party has initiated force, there are no exceptions.

Julian would seem to be arguing against patents in any situation whatsoever, whether software, pharmaceuticals, or new technology of any kind.

As I have argued elsewhere, railing against patents as “monopolies” granted by the government leaves you in the rather uncomfortable position of arguing against all property rights. All property is, in the end, a monopoly (that is, the exclusive right to use and dispose of the property in question) that is granted or at least maintained and defended by the government.

I do not believe it is possible to treat intellectual property as fundamentally different than other forms of property. I have yet to hear an attack on intellectual property rights that was not also, to some degree, an attack on all property rights.

This is not to say that our current system of managing intellectual property rights, and in particular the difficult practice of patenting intellectual property, is not open to revision.

Its just that I find broad brush arguments that do not take into account the fundamental similarities between intellectual, intangible, real, and personal property difficult to take seriously.

You want empirical proof (numbers and statistics) about lack of innovation due to lack of patent protection ? Sorry, impossible. You can’t have numbers about things that didn’t happen !

It is a fact that countries of the West did have patent protection, and also a lot of innovation. Other countries (Eastern Europe, Africa, South America) probably had a lot less patent protection, and surely a lot less innovation, though there were other factors causing this.

In Economics, unlike Phisycs, you can’t do experiments, and each phenomenon has multiple causes which cannot be isolated and researched independently. That’s why it is called the dismal science.

So you should not be surprised and bothered by lack of clear-cut empirical evidence.

Take an example. Three engineers invented the LZW data compression algorithm. (The one used by zip – and practically, by everyone). It is a very simple idea, it can be described in half a page of text, it can be understood and encoded by any programmer within a couple of hours. But it was they who thought about it first, tried it, and published it. They also patented it.

Would they have refrained from discovering it, absent patent rights ? I don’t think so. Would they have failed to publish it ? I don’t think so. So are we suckers for paying them royalties for something we could have had for free ? Again, I don’t think so. We use their idea, we draw benefits from it, it is just to pay them some royalties.

Thus, granting patents is based also on notions of justice (not only utilitarianism): people need to be rewarded for inventing useful things that other people draw a benefit from. Even if it is technically possible to get those innovations for free, it would still be just to reward the inventor.

You want empirical proof (numbers and statistics) about lack of innovation due to lack of patent protection ? Sorry, impossible. You can’t have numbers about things that didn’t happen !

It is a fact that countries of the West did have patent protection, and also a lot of innovation. Other countries (Eastern Europe, Africa, South America) probably had a lot less patent protection, and surely a lot less innovation, though there were other factors causing this.

R C Dean: if I steal your sandwich, you have no sandwich, and I am a thief. If you claim a monopoly over sandwich-making, and I make a sandwich, you have neither less nor more than before, and you must impose yourself forcefully on (unsuspecting third party) me in order to prevent my use of cheese, ham and bread in that manner.

R C Dean is correct. One can make a legitimate argument that the optimal intellectual property rights regime is different from what we have, but to say there should be no system of enforceable claims is a somewhat bizarre idea on a libertarian blog. Maybe the length of patents is too long, or too short. (Actually, I thought the hard-core libertarian claim was that patents should have an infinite life.) Also, there can be legitimate arguments about scope. For example, either Apple or Amazon, I forget, tried to patent the concept of a one-click checkout. That seems a little much.

My guess is that if pressed, the author of this piece was claim that patents were needed but were in fact too broad. That is a coherent argument. Claiming that patents shouldn’t exist at all is not an economically sound argument if you believe individuals are rational, self-interested actors.

And the comment about intellectual property being non-rivalrous. Yeah, so what? The resources used to create the intellectual property still have opportunity costs.

The more interesting questions are devising ways to protect intellectual property in today’s digital age, and what to do about rogue nations like China who ignore treaties on intellectual property.

“The resources used to create the intellectual property still have opportunity costs” is a variant on Marxist ecomonics. “I worked, so I’m owed” – no you aren’t. There is no “owed”. Consensual trade defines the terms of an exchange. Third parties who have not consented to trade owe you nothing.

To summarize the countercase against the “justice” argument: you are trying to do the same as the socialists who seek to impose “social justice” by rigging the market, and you are equally wrong. Natural justice is protection of self and property from impositions. There is no “fairness” in justice, neither “fair shares” per the socialists nor “fair reward” per the IP-ists. Your share and your reward is your own problem to solve.

“The resources used to create the intellectual property still have opportunity costs” is a variant on Marxist ecomonics. “I worked, so I’m owed” – no you aren’t. There is no “owed”. Consensual trade defines the terms of an exchange. Third parties who have not consented to trade owe you nothing.

Bizarre argument. Who said anything about non-voluntary transactions? My argument is simple: Production of intellectual property is costly. Without mechanisms to compensate the producer, the quantity of intellectual property decrease. Where exactly in that argument is anything about third parties being taxed? I don’t see it.

On second thought I apologize if my above post comes off as unnecissarily glib and snide, but the point remains. Having no patents/copyrights at all pretty obviously diminishes the incentive for innovation, which should make us all worse off if people are mostly rational. I’m no fan of the current IP scheme, but failing to acknowledge this bedrock fact leaves us with no common ground for discussion of what changes should be made.

The difficulty I still have is, when talking about whether software should be patentable (as opposed to hardware), is that there is no clear dividing line between software and hardware (as I illustrated previously in the case of FPGAs, but there are many other examples).

To have a debate about whether software patents specifically should or should not be allowed, someone needs to define how they would differentiate clearly between software and hardware. Otherwise, the argument should be for or against patents protection, full stop.

I wasn’t keen on software patents before, but this article has just set me dead against them. The short answer is that there is no boundary line between algorithms and pure math, so algorithms shouldn’t be patentable either. I’m sold.

In response to HJHJ, the article also draws a dividing line between the patentable and unpatentable thusly: “Let the devices that implement state machines—physical objects such as computers—be patentable, and the states to which they are set—information such as programs and data—remain unpatentable.” (Emphasis mine.)

I’m not sure how hard and bright this line is, but it seems clearer than what we currently have.

Matt McIntosh: I’ll be equally succinct: nonconsensual “incentives” are theft. Being forced out of the market, or being forced not to trade with anybody other than the monopoly holder, is nonconsensual. Nobody has a right to hand out incentives with other people’s money.

The problem with patenting software is you are generally patenting an algorithm.
An algorithm is mathematics and mathematics has always been considered a discovery not an invention and has never been patentable.
If you patent algorithms you stifle academic freedom as well as (in the current case) small business.

Patents on software will help shut down many small software companies who cannot afford patent disputes over things they have already discovered independantly. It gives the power to already large corporations who in many cases have near monopolies to gain a monopoly which I should think most libertarians will agree is a bad thing, it rigs the market to a huge extent.

Copyright stops you code being used if you wish. That is your creation, you should maintain control over that if its what you wish (and in line with the license of any code you have based it upon, if any).

Perhaps if the patent system worked in the manner intended they would be more reasonable, but as it is patent officers do not understand what they are patenting and issue absurd patents which are obvious to anyone who works in that field (like the Amazon ‘One click’ patent, its obvious to anyone who has thought much about web based shopping).
Patents are also expensive to get and even more expensive to review, and overturn if they are wrongly issued (some patents which go through have demonstrable prior art, but naturally the patent holder will not tell the patent office that).
Basically the patent system, as it stands, is rigged towards the rich company against the small start up.

(as for other aspects of the EU Patent Directive, some are much needed, such as the unification of the European patent systems)

What is your accepted theoretical basis for property protection? Natural right ? Utilitarianism ?
Exactly the same applies to IP.

Suppose you invented some kind of lawnmower (or any gadget) that is new and marvelous indeed, having worked for a year in your basemant garage. Then you invited some people, showed them your mower. A couple of months later some company offers the mowers for sale, and makes fat profits. Turns out – one of your guests revealed your invention to them, getting a cut in the profits.

Is that scenario ok, fine, just, utilitarian, efficient, acceptable, desirable ?
Aren’t you entitled to some ownership ower your invention ? Is that ownership an arbitrary, deplorable and unjust state intervention ?

Jacob: the justification of property is to secure exclusive control of an inherently exclusive object, so as to settle peacefully who gets to make use of it in a way that ruins it for other uses. That is: territory is inherent in the exclusive nature of objects, and property is territory where force is ruled not legitimate and exchange must be by consent. It isn’t so much an institution, as a discovered natural law.

None of the above applies to IP, where performances and inventions are inherently copyable and nonexclusive.

In terms of your lawnmower anecdote, let me reiterate: your reward or it’s absence is your problem. If you cannot find way to structure your contractual dealings with the company such that they have to pay you, then you can starve. Imposing fair outcomes is not the business of justice. (BTW, I recommend in such a case, the well known legal tool called a “non-disclosure agreement”, and suing if it is breached).

Matt McIntosh: understood – but the reason I do take it as such is because my understanding of the theory of property, as explained above. Property purism allows a fully functioning society to be completely non-coercive (strictly, non-initiating of coercion). Given that, how could a more coercive society be morally justifiable?

Software patents are indeed absurd and stifle innovation, and algorithms are indeed akin to pure mathematics. And prior art is just not well checked (or often comprehended!) by patent examiners for software. Patents on things that are obvious to any programmer, and that have been routinely done for years on a wide scale, have had patents issued.

I’ve gotten so frustrated with having to ditch projects because some piece of it ended up being patented over the last 10 years or so that as soon as the mathematics degree I’m working on is done, my wife and I are planning to decamp from the US to somewhere without software patents.

The cycle of innovation is so much shorter in software that granting patents on it pretty much almost guarentees that only large corporations with cross-licensed patent libraries will be able to pull off the release of a system of much complexity without accidentally re-inventing something obvious and hence violating some ridiculous patent or another.

Part of why software is of such low quality is that many innovations that would improve security and suchnot are patented. Same for anonymous digital cash, for which a free workaround for the patent that covers it just got cooked up in the last year or so.

If there were a reasonable compulsory statutory licensing fee (say, 2-5% of gross), similar to that for sheet music, I wouldn’t be nearly so opposed to them in practice, although I would still not like tham in principle. As things stand almost all software patent holders (large corps) won’t license except to their peers, for reciprocal patent rights to their portfolio. The little guy is indeed screwed in this situation.

Copyright is generally about published works in an art form. Protection via a patent is described as having control over some proven “system” or “Formula”. IP protection is very different from government granted monopolies.

Theoretical social arguments about benefits to the populace as a whole aside.

Remember IP rights are there to protect organisations that spend time and resources searching for an answer to a problem people have. When they find the answer costs need to be recouped. Counter IP arguments that start talking about Return on Investment are a non-starter. Both parties, open source and IP protected organisations, but fight for their own agenda. This makes balanced arguments difficult.

Also IP serves as a way of documenting the actual formulas used in a project. When a patent expires they are often useful for other organisations to use as bases for other projects.

Coca Cola, that symbol of capitalism, has a secret formula, not a government granted monopoly. I believe it is relatively successful.

You’re point is what? That an organization might in certain circumstances be able to protect its trade secrets. Usually this is only possible when you are protecting a manufacturing process that is hidden from the public and from customers. But when you put out a product where design and innovations are readily examinable because they are inherent in the product, there is no recourse to trade secrets. Such is the case with software running on a general purpose processor.

I suppose companies could always employ onerous schemes to protect their software innovations, such as partitioning logic into a client-server architecture run over the Internet with the proprietary or trade secret algorithms running on a server controlled by the developer. Or they could implement algorithms into propretary hardware that hides the logic. All of these things increase cost and inconveniece and reduce the market and availability for an offering. They also keep innovations hidden from others on a permanent basis. Software patents do lead to publishing of information regarding innovations and do allow those innovations to be used in the open on a general purpose computer while offering the developer protection. The benefits of the latter should not be underestimated. Distributed systems that don’t rely on a central choke point like a server offer greater performance in most situations, and specialized proprietary hardware will become trailing edge quickly as it is not worth the investment for both the vendor and the customer in many cases to keep it up to date.

Julian Morrison:“None of the above applies to IP, where performances and inventions are inherently copyable and nonexclusive.”

The concept of property rights evolved out of the utilitarian need to avoid perpetual struggle and warfare over the use of tangible goods like land. Correct. But there is also another aspect: there is the weak party, who isn’t able to put up much of a fight. He nevertheless gets his rights protected as well. There is some sense of natural justice involved.
Property rights are based on both – the utilitarian concept of unbelligerent solutions of conflicts, and the “natural rights” and “natural justice” concepts.

You claim IP rights need not be protected as far as utilitarian non-belligerence is the logic. Maybe. But they are protected under the other argument: natural justice. Even things that “are inherently copyable and nonexclusive” can be owned.

IP protection has evolved over the centuries in a “natural” way and is a well established part of our societal institutions – much like property rights (which are also challenged by many “radicals”).
Protection of IP isn’t harmful to other people – and is an implementation of natural justice, and that’s why it came into existence. It should not be dismissed lightly.

I recognize the difficulties of defining and implementing IP, and the dangers in excessive granting of patents. Maybe patents in software are indeed unimplementable, unjustified or too widely abused and should be abandoned.

The quotation you provide:
“Let the devices that implement state machines—physical objects such as computers—be patentable, and the states to which they are set—information such as programs and data—remain unpatentable.”
sounds reasonable on first inspection. However any electronics engineer can tell you that this is not a realistic dividing line. Digital electronics hardware is nowadays always described in a software model (Verilog or VHDL) of the hardware, or the function of the hardware (you can mix these) before implementation. You can license a synthesizable ARM processor (as used in mobile phones, iPods, etc.) – and the translation into a hardware design can be largely (or wholly) carried out by synthesis programs. At what point did the design change from software to hardware? If you implement an ARM in an FPGA where the hardware is temporarily configured by data stored in memory (and then runs software stored in another memory) – is this a software or a hardware configuration?

Jacob (July 28, 2005 09:05 PM) is missing a key point in the consequences debate of patents. The bulk of this is about the specific-details-of-practicality argument. The moral argument, though arguably more important because it gives the general direction of practicality, I leave for another time.

It is certainly the case that innovation will NOT drop to zero if IP protection were eliminated, but it is also certain that it WILL be curtailed significantly. The non-zero part will come from the work of engineers et al whose benefit is the satisfaction of creation and problem-solving as ends in themselves where for such people the work is its own reward (and is a fair chunk of the reason why people got into that career in the first place) and is funded by people who happen to like seeing things being done successfully. The massive curtailment, on the otherhand, will be where would-be creators are not sufficiently enthused by the results of the work to perservere through the daily grind without the prospect of some material benefit at the end of it, and similarly where funders wont fund such uninspiring projects without reasonable expectations of meeting risk-adjusted rates of return on their capital.

Only on limited occasions will a properly financial-benefit-motivated entrepreneur proceed without IP protection, such as where that entrepreneur envisions being able to produce the product far cheaper than competitors arising from a better familiarity with the theory etc behind it – for software, that means being able to maintain the programs faster and better than a copy-cat can, or where the benefit without reference to direct revenue-generation exceeds the cost, and so on. Another likely source of financing is that the increasing amounts of charitable funds for research and the like will ensure that at least some R&D will still be present even in an economy lacking IP protection that is otherwise laissez-faire, but don’t pretend for a second that output wont fall drastically.

I don’t claim to know either way whether patents or copyright represent the best solution for protection of IP on software concepts, but I do know that at least some protection by the full force of the law is due. Don’t kid yourselves that IP law isn’t necessary, people, for without legal protection IP generation will collapse into little more than the meagre output of the gentlemen-researchers of the pre-industrial era where volume is only increased via sheer population growth and more disposable income.

After all, why would an entrepreneur go to all the time and effort of opening a chain of coffee shops if his competitor can simply copy the idea? Surely this is both unjust and will result in a decrease in entrepreneurship, to the detriment of all?

[T]he justification of property is to secure exclusive control of an inherently exclusive object, so as to settle peacefully who gets to make use of it in a way that ruins it for other uses.

Whoa, there big fella. This is a very interesting definition of property, but it is not the one that is commonly used and accepted at all. Property rights are about exclusive control, period. They have no connection whatsoever to use. I can violate your property rights by making use of your property in a way that in no way interferes with your use of the property. You can have property rights in something that can be used by a number of people.

If you own a large, vacant parcel, and I throw a picnic on one corner of that parcel, I have in fact trespassed, even though you were out of town and your use of the property was in no way interfered with.

Believing that property rights apply only to material objects is a fallacy. Do you own the money in your bank account? Of course you do. Is this money represented in any material object, such as coins or cash? No, it is not. In fact, the sum total of physical cash in the US (and I am sure in Britain as well) is a mere fraction of the sum total of money on deposit in banks.

It is impossible, in other words, for everyone to have all their money reduced to physical cash, yet this impossibility interferes not at all in their ownership of their money. They own something that is not a material object, but is entirely intangible. Physical cash, in fact, is not money, but is merely evidence of money. It is a map, not the territory.

Money is merely the best-known incident of a large category of property that is known as “intangible’ property. The name alone should tell you that it is not an object, and is therefore infinitely copyable and nonexclusive.

None of the above applies to IP, where performances and inventions are inherently copyable and nonexclusive.

There is nothing inherently exclusive about your parcel, either – anyone who wants to can walk onto it and make use of it, as in fact I did. There is nothing inherently non-copyable about cash and other forms of intangible property, either.

The non-copyable and exclusive attributes of property are something that is created by property law, not the other way around. My use of property is exclusive because I live in a society that makes it so. I mean, you can’t even identify “my” property without referring to wholly arbitrary and imaginary lines that are recorded in a courthouse somewhere.

Similarly, you can’t run around copying intangible property because you live in a society that prohibits such activities as a species of fraud. There is nothing about a bearer bond that makes it physically impossible to copy, after all.

Intellectual property is merely a species of intangible property, and intangible property is not qualitatively different from any other kind of property. Indeed, the essential attributes of real property (its metes and bounds) are intangible.

As I understand the examples and arguments used by Kevin Marks, Julian Morrison, et al. they are equally applicable to copyright law. The are lumping all IP together. Is a cd player to be protected as a “state machine” but the music is a “state” and cannot be protected?

You can try to reduce anything ad absurdum. Why not grant property rights to cats ?

You need to debate each specific category of ideas or IP on the merits of the case. Maybe “monopoly rights for entrepreneurial ideas” are not justified, but other IP categories are.

What’s so difficult to grasp in this point ? Say you had a very bright idea, and many people find it useful, and want to use it to their benefit. Are you entitled to some remuneration from them or aren’t you ? (Mostly they’ll be only too happy to pay you). What’s wrong with the state helping you collect what’s your due from potential cheats and defrauders ?

“Money is merely the best-known incident of a large category of property that is known as “intangible’ property. The name alone should tell you that it is not an object, and is therefore infinitely copyable and nonexclusive.”

I think the easiest way to solve this would be a compromise. Hey, it’s not ideologically ‘pure’, but we’re not looking for pure solutions here. We want a system that rewards enterprise and innovation, yet does not shut out the rest of the field and the market from benefitting from the discoveries made.

On one hand, you can completely demolish IP patents. What are the likely consequences? It is argued that innovation will still proceed as normal. Witness the (relative)success of open-source software. But human nature being what it is, a whole lot of people will be desperately copying one thing and the other, and anybody who makes a breakthrough will only have a very short time to capitalize on the discovery before everybody else jumps on the bandwagon. There may be very real disincentives to develop new stuff as opposed to coming up with new stuff in the past solely due to the geek factor.

Then you have the immortalized IP patent, which plainly creates monopolies. The problems with that is obvious.

To cut it short, let’s keep patents around, but give people who make the relevant discovery some time to enjoy the fruits of their labor. Two years? Three? Enough time?

You want to be truly evil, here’s a thought: Molecules can also be expressed as mathematical algorithms, because the basis for molecular structure and bonding is quantum physics, and quantum physics uses mathematics as its language.

Granted, we can do that only for simple molecules so far, not the highly complex drugs we have, but still…

R C Dean: you misunderstand my point. Any use of physical property is exclusive use. If I borrow your bike and return it unharmed 5 minutes later, I’ve deprived you of the use of it for those five minutes. If I picnic on your land, I’ve deprived you of the use of that land as being empty (which is still a genuine use).

Yes, money is an interesting case, because it transforms in and out of physical representation, and its primary substance is conceptual. I think that the flow of money in its nonphysical forms would be better represented as contract than property. That is, you don’t own the money in your bank (unless it’s a Gringotts’ style holding vault), you have a contract with the bank to let you redeem it. In fact I believe the UK law is structured that way.

I would say that you are mistaken that property law defines the qualities of property. I’d reverse that and say that the inevitability of physical property was the seed of custom, which became law. But when that law gets to big for its britches and decides it can definine ideas as nonreplicable, it’s doing much the same thing as the folks who tried to decree pi to be 3, namely making a fool of itself.

Interesting debate, the notion of intellectual property is a thorny issue for liberal people.

As for country with or without IP respect being better or not, an anecdote: the USA did not respect at all other (richer at the time) country until very late and still has been a very successfull country. It’s kind of funny to see all the fuss about China and USA IP respect nowadays :).

Another practical point: it’s relatively easy to track physical property and so to qualify stealing, even for a dumb, small or big government. Now with IP that’s another story, how is government now supposed to be so smart as to know what’s new, non-obvious to the skilled, falling or not into patentable matter and so in all fields of human knowledge? If a government is so smart while staying small, then what do we need private enterprise for? “government needs to be better at handling patent application”, well… doesn’t work.

Also to be efficient in high and fast innovation areas like software, such dispute resolution needs to be taken in a matter of weeks, not years. Doesn’t work.

Last thing, patent system tend to work better when there is a small number of patents and expensive processes at the research level, a billion dollar drug will be protected by only one patent so the cost for competitors to know about it is small, software and concepts needed for a simple web site that need practically no capital to produce are currently covered by thousands of patents. Doesn’t work.

Since there are software patents with my name as an inventor I have some idea of how the whole process works. These patents are owner by my employer.

Software patents are a bad idea and the patent office just makes it worse. Most software patents are issued for incredibly simple concepts. You don’t even need an embodiment of the patent for a software patent, that means you don’t have to build it first before you can patent it. Software patents are really patents on ideas.

The patent office will issue just about any patent if the lawyers put enough legal BS in it. Also Amazon did get the One-Click patent. The big players are patenting everything.

Software patents only hurt innovation. Since most of the software patents are trivial anyone writing software can (and probably will) infringe on someone elses patent. Because of this the big boys can legally smash any new and innovation company who does not, since it is new, have a patent portfolio to counter sue with.

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